Wealth Creation and the Ownership Society
Africando
September 21, 2007
Miami Beach, Florida
Becky Norton Dunlop
Thank you for the opportunity to talk with you today...
Fred Oladeinde, Tony Okomah, thank you for all you are doing to
advance freedom and civil society in our world today. And thank you very
much for inviting me to address this distinguished audience.
Honored guests and friends,
The theme of the conference this year is ―the Link between African
culture and African development: Understanding the Role and Importance of
African culture in the Development Process.
My task today is to talk with you briefly about some of the key
principles that contribute to wealth creation and an ownership society.
Wealth creation and development are two sides of the same coin. A society,
community or people that have wealth can control development, lifestyle
and the evolution of culture. Wealth means more opportunities, better
health, more education and frankly, more freedom and liberty for people.
In recent decades, economists have come to appreciate that ideas play
a critical role in generating new wealth. Ideas drive innovation: new
products and services that let us do more things we couldn’t do before;
cheaper ways of making products that allow many more people to afford
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them; or more efficient ways of getting those products to consumers.
Wealth-creating ideas are those that increase our productivity so that we may
have more of the things that make life a little easier, a little more
comfortable, and a little bit safer.
Material wealth is more than just the sum of labor, land, and capital. It
maters how those inputs are combined. That’s where ideas come into play.
Of course, there are nearly infinite ways of combining all the various
resources available to mankind, and only a very few of those combinations
result in human happiness. I like an analogy from economist Paul Romer,
who points out that if you shuffle a deck of 52 cards, the chances are
practically 100 percent that the resulting order has never before occurred in
human history. For you math majors out there, the number of possible
sequences for 32 different items is 8,066 times 10 to the 67 th power. There
isn’t enough room on this stage to fit that many zeros—and that’s just for 52
items. The human mind cannot comprehend all the possibilities of a deck of
cards. How can it comprehend all the different possible combinations of
resources in the world? No one person can. And importantly—no
government bureaucracy can either.
So, how do we discover those combinations that work? The answer
turns out to be quite simple: trial and error. Human beings discover what
works by trying –and usually failing. That’s the easy part. The hard part
turns out to be creating the political and social institutions that allow people
to come up with new ideas and try them out.
If you could sum up the formula for economic growth in two words it
would be: individual liberty. In order for new ideas to be discovered and
tested, individuals must be free to combine economic resources in ways that
have never been tried before. And since new ideas usually fail, individuals
must also be free to reap the rewards for their successes. Otherwise they
would never bother to endure the risk of failures.
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At The Heritage Foundation, we have a framework for evaluating
economic liberty around the world. We call it the Index of Economic
Freedom, and we’ve been publishing it for 13 years now. When we discuss
economic freedom, it is for everyone and not just the elite few.
The Index of Economic Freedom is composed of 10 measures of
different areas or aspects of economic freedom. The 10 economic freedoms
of the Index are: Business Freedom, Trade Freedom, Fiscal Freedom,
Freedom from Government, Monetary Freedom, Investment Freedom,
Financial Freedom, Property Rights, Freedom from Corruption, and Labor
Freedom.
I want to touch on just a couple of these freedoms in our time together
and explain how they relate to this basic idea of giving individuals the
freedom to combine economic resources in new ways, and reap the benefits
for those combinations that succeed.
First, and perhaps most importantly, secure and stable property rights
gives individuals the assurance that they may use their assets as they choose
without interference from the government or anyone else. In some
countries, legal ownership of property is not clearly established. Who would
take the risk of setting up a new business, when they can’t be sure of who
actually owns the assets the business is using?
Just as importantly, property rights also refers to the legal ownership
of ideas on how to do and make things—or intellectual property, conferred
in the form of patents, trademarks, copyrights, etc. Strong intellectual
property rights provide important incentives for creativity and invention.
Protection of individual property rights is the basis for the ownership society
and for the creation of wealth.
Trade freedom means the freedom to trade across borders. The reason
this factor is important was explained some years ago when it was pointed
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out that each country does some things better than it does other things. This
seems obvious to us today. Those things a country does better are called its
comparative advantage. Open trade allows countries to specialize on the
things they do well, while trading for the other things they need. Barriers to
trade, obviously, can get in the way of innovation, when for example; it
prevents a company from utilizing a new process that requires raw materials
or products from abroad.
There are some foundational principles of a civil society that also
need to be in place to begin really advancing economic freedom. We do not
have time to go into these today but it is important that there be the rule of
law with civil and criminal codes, an independent judiciary and the sanctity
of contract. Even this morning in your session, there was discussion about
―why rules need to be clear and unambiguous.‖ There needs to be emphasis
on a personal code of conduct also. Integrity and trust, transparency in
transactions all are underpinnings of an ownership society and opportunity
for wealth creation.
Finally, we must always keep in our minds that people are the most
important valuable and precious resource in our world. The cultures of
different peoples must be valued and we need to be encouraged to pass along
the best aspects of own cultures while casting off those elements that do not
respect the rights of individuals. Protecting and preserving the best values of
our cultures, providing the foundations so that every culture allows
economic opportunity for its people so they can create wealth and reap the
benefits of an ownership society.
Thank you very much for allowing me to share these thoughts with
you today and to discuss some principles from the Heritage Foundation’s
Index of Economic Freedom.
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